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COST-ESTIMATING METHODS The second part of this report presents a discussion on how cost- estimating methods are developed. We discuss the principal cost- estimating methods—i.e., analogy, bottom-up, and parametric. The bottom-up approach relies on detailed engineering analysis and cal- culations to determine a cost estimate. Another approach related to the bottom-up method is estimating by analogy. With this approach, an analyst selects a system that is similar to the system undergoing the cost analysis and makes adjustments to account for the differ- ences between the two systems. The third approach is the parametric method, which is based on a statistical technique that attempts to explain the changes in the dependent variable (e.g., cost or develop- ment schedule) as a function of changes in several independent vari- ables, such as intrinsic engine characteristics (e.g., size, techni- cal/performance characteristics, or risk measures). We selected the parametric method for our analyses in this study. We next focus on the estimation of parameters for the various turbo- fan engines in our database, data normalization and our efforts at validating the data, and the addition of new observations to update a series of parametric cost-estimating relationships published in ear- lier RAND studies. Finally, we describe a series of technical risk and maturity measures that we applied to each engine in our database. We describe our statistical analysis and present a series of parametric estimating methods for aircraft engine acquisition costs and devel- opment times. We determine each of the cost-estimating relation- ships through a series of stepwise and ordinary least-square regres- sion methods. We present cost-estimating relationships for aircraft turbofan engine development cost, development time, and produc- tion cost. Finally, to illustrate how the various estimating relationships pre- sented in this report can be used to generate cost projections, we provide examples of two notional engines—a new engine with ad- vanced technologies and a derivative engine that employs more- evolutionary technological advances. Summary xvPDF Image | Military Jet Engine Acquisition Technology Basics and Cost-Estimating Methodology
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